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Wednesday, 12 December 2018

Doing Business in Sudan: Investments and Untapped Opportunities (1-3)

Sudan has featured prominently in the news the past few months. Among the reasons for this phenomenon

, was the USA lifting sanctions against the country, although it still kept Sudan on the list of countries sponsoring terrorism. Qatar, Russia, Saudi Arabia, Turkey, and the UAE have all reached out to Sudan in one form or another. The latest news involved Sudan experiencing a serious cash-flow problem, to the extent that it is trimming its foreign diplomatic services quite seriously.
In spite of the challenges that Sudan is experiencing in the financial services sector, the country presents numerous investment opportunities, several in the financial services sector. Many of these opportunities require funding. This is where Sudan needs serious development. Some of the opportunities can be difficult to tap into given the lack of liquidity, and the challenges in the political sphere are an additional deterrent to investors as well. Still, for the keen investor there is a wealth of opportunity to unlock.
According to Chambers and Partners, Sudan is a country of great economic potential. It has a strategic location, gold reserves, oil & gas fields, other mineral resources, a favourable climate, as well as excellent irrigation and soil conditions.
Sudan’s National Investment Encouragement Act of 2013 promotes foreign direct investment (FDI) and prohibits discrimination against foreigners in investments. The act defines three types of investment projects: national, strategic and state. Sudan has put in place an open investment legislative framework with several laws and regulations that are modern and based on best practices. The act also establishes the National Investment Council, chaired by the president of Sudan. The focus and objective of this council is to facilitate investment in all sectors of the Sudanese economy. The act allows foreign and domestic private entities to establish and own business enterprises and to repatriate capital and profits.

Investment opportunities in Sudan

Chambers and Partners have identified the following investment opportunities in Sudan:
* Natural resources/mining: Natural resources, especially gold, oil, gas, chrome, manganese, zinc, aluminium, cobalt, and nickel. Gold production in Sudan reached 22.3 tonnes in 2016, ranking it as one of the top producers in Africa.
* Agriculture: With the Nile river running through it, Sudan has more than 150 million hectares of arable land. The climate is suitable for all types of crops, and water irrigation is readily available and/or natural. Sudan specialises in cereal production (sorghum, millet, wheat, corn and rice), crops (cotton, sugar, peanuts, sesame, and gum), and tropical fruit and vegetables.
* Livestock: Sudan is highly regarded in both the Middle East and Africa for its livestock and animal resources. The country has national animal resources, which include cattle, camels, sheep, goats, poultry, horses, and an annual stock of more than 110,000 tonnes of fish. The most important animal products in Sudan are milk, meat, poultry, skins, fur and wool.
* Transport: As Africa’s third-largest country and bordering seven countries, Sudan offers great opportunities for investment in the transport sector. The weakness in the transport network remains one of the greatest constraints to the economy.
* Industry: Investment opportunities in industry in Sudan include the following sub-sectors: agri-processing, food, spinning and textiles, leather, chemicals, pharmaceuticals, oil and soap, engineering, building materials and refractories, and printing and packaging.

Foreign Investment in Sudan

Nevertheless, in spite of the mentioned challenges and constraints, potential investors were already moving into Sudan from the Gulf, Asia, Europe and South America in March 2017, some of them well before this time.
China has invested in various aspects of the industry until it now controls as much as 75% of the Sudanese oil industry. Sudan currently produces 133,000 barrels of oil per day – a fraction of what it produced before the south of the country seceded in 2011, taking most of the country’s proven oil reserves with it. Today, Chinese companies are looking for new oil deposits in Sudan as increasing oil production is one of the government’s priorities. While China started in oil, they now have other interests in trade, mining, and construction as well. Within the oil industry today, most of the engineers and technical experts in Sudan and South Sudan are Sudanese. They were trained in China. Sudan is the only country in Africa where, over time, more locals have been employed by Chinese companies (Hammond, 2017).
Saudi Arabia and the Saudi private sector are currently investing in maritime transport in Sudan, benefiting from the strategic situation of Sudan, to construct new harbours and ports at the Red Sea. The development of all transport units, particularly maritime transport, and the construction of new ports and harbours are deemed as very important.
The UAE agreed in the beginning of 2017 to provide the Central Bank of Sudan (CBoS) with a $400m deposit as a reserve. In addition, the Sudanese government had formed a joint business council with Bahrain to promote investments. A Saudi company was financing an industrial estate north of Khartoum with $150m.
Qatar has also been positioning itself in a meaningful way in Sudan. Qatari investments in Sudan represent a large proportion of foreign investment in this country, through Qatari institutions such as Qatar National Bank (QNB), Diar Real Estate Investment, Widam, Hassad Food Company, Barwa Real Estate Group and Qatar Mining, in addition to Silatech, Education Above All and Qatar Museums projects, as well as Qatar Charity, Qatar Red Crescent, the five Darfur projects and the UN Development Fund for Darfur projects. The current Qatari investment in Sudan amounts to more than $2bn and is expected to rise with the introduction of new sectors such as Qatar Mining Company (QM), which will invest more than $1bn in its field.
Turkey’s investment footprint in Sudan has become quite visible. Sudan needs an investment of approximately $500bn in various sectors, amongst others in its significant gold and copper mines. Given its lack of proper mining technology, Sudan has certain limitations. Turkish businesspeople were urged to establish a system to process those metals and integrate them with Turkey’s gold exchange market to provide overseas finance for Sudan. Five consortiums were created with Sudanese and Turkish businesspeople in the fields of construction, energy, mining, agriculture and machinery. The construction consortium includes building roads, bridges, hotels, schools and infrastructure works.